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Industry Snapshot

Outdoor advertising was the first,--and at one time the only--form of advertising in the world. By 1997, with the competing advertising media of television, radio, magazines, newspapers, and cable television, outdoor advertising--primarily billboards--made up less than 5 percent of total advertising expenditures in the United States.
Historically, outdoor advertising agencies have relied heavily on tobacco and alcohol advertising--at one point these accounts provided more than 50 percent of their revenue. However, in the late twentieth century outdoor advertising of these products dropped substantially because of the public's increasing concerns about living a healthy lifestyle.
With the decline in tobacco and alcohol advertising, outdoor agencies began to focus on attracting new business. Some advertisers were quite successful in doing so as the most popular billboard spaces, once dominated by long-standing tobacco contracts, became available. According to the Outdoor Advertising Association of America (OAAA), outdoor advertisers posted almost $7.0 billion in revenue in 2008. billboards, street furniture, transit, and alternative media. Growth in the industry was expected to continue into the 2010s, as new technologies in outdoor advertising such as full-motion digital electronic billboards and signage with the ability to change copy almost instantly became more common.

Organization and Structure

The outdoor advertising industry can be divided into two major classifications: on-premise and off-premise. On-premise advertising basically entails the use of signs to identify a business establishment. Off-premise advertising is a service in which outdoor displays are erected and maintained on property owned, leased, or controlled by a third party.
Off-premise outdoor advertising has generally been geographically subdivided into rural and urban. The rural road sign tends to the immediate needs of the traveling public, such as food, fuel, and lodging. In urban settings, three kinds of off-premise advertising have historically been found. The first two, transit advertising and neighborhood point-of-purchase, have historically produced only a small volume of business, although by the late 1990s the industry had begun to fully utilize advertising on mass transit buses, subways, taxicabs, and more. The third category of off-premise advertising--called a standardized medium but better known as a billboard--dominated the outdoor industry throughout the late twentieth century.
Bulletins are the largest kind of billboards and generally can be found in three sizes: 14 feet by 48 feet, 10.5 feet by 36 feet, and 20 feet by 60 feet. Usually these boards are placed along interstate highways. The traditional billboard, sometimes called a 30-sheet, runs 12 feet by 24 feet and has been used for niche marketing. New to the industry in the 2000s was the eight-sheet billboard, measuring 6 feet by 12 feet. Previously found in highly dense areas with limited space, eight-sheets were used in suburban communities and were especially popular for regional and ethnic marketing. At an average price of $100 to $150 per board in the 1990s, eight-sheets were significantly less expensive than the traditional posters, which sold for an average of $500.
New, technologically advanced boards began to show up in outdoor advertising in the late 1990s and 2000s. One example was been the Premier panel, created by Patrick Media Group. This type of board offered improved graphics by printing ads on vinyl using computer technology. The Premier panel also had 30 percent more space than a traditional 30-sheet because it stretched the advertisement around the board rather than containing it inside the frame.

Background and Development

The history of outdoor advertising can be traced to the development of mass communication. Until the fifteenth century, public posting was the only means (other than the town crier) of disseminating information. In 1450, when Johannes Gutenberg invented printing from moveable type, messages could be duplicated on a widespread basis and advertising in its infancy took the form of a handbill. Around 1480, William Caxton introduced a new type of printing in England and the first poster was printed. When German Alois Senfelder perfected the lithographic process in 1796, he provided the means for merging the all-type handbill with graphics, creating an illustrated poster.
The printing press made possible the development of two other media: the handbill and the circulated bill. The handbill was popular because it could be distributed in quantity. The circulated bill was the forerunner of newspapers and magazines.
At first, bill-posting consisted of sticking advertisements on walls and fences around London and hoping that the competition would not tear them down or cover them with postings of their own. Eventually, standards were developed to ensure exposure for a set period of time, which required gaining the exclusive rights for posting. As the areas with the most traffic grew, bill-posters soon began to build their own surfaces. Due to the tendency to use fences for posting, these new structures took the name of "fences." Bill-posting spread overseas with the development of the colonies in North America, and the new structures built in America soon were referred to as "billboards" or "boards."
Early poster advertising in the United States consisted of notices selling farm stock and equipment and announcing county and state fairs, theatricals, circuses, horse races, community parades and celebrations, carnivals, and medicine shows. Since a large portion of the posted material was used to advertise the theater, the local theater manager was often in charge of the outdoor advertising in the city. It also was a common practice to ensure the protection of a posting by giving a present, such as tickets to the circus, to the owner of the billboard.
Outdoor advertising broadened its scope with the advent of the automobile and the U.S. highway system. From the 1920s to the 1960s, outdoor advertising was considered one of the best ways to reach consumers outside the home, especially in areas not covered by the major daily newspapers or magazines. The unchecked growth of outdoor advertising subsided by the early 1970s, as environmentalists began to complain about the "clutter," especially in rural communities. Through the work of Lady Bird Johnson, the Highway Beautification Act, which set limitations for billboards in rural areas, was passed in the mid-1960s. December 1991 saw the passage of the Intermodal Surface Transportation Efficiency Act (ISTEA), which banned the construction of new billboards along scenic highways. Despite these and other local restrictions, U.S. cities remained covered with out-of-home advertising opportunities.
Tobacco marketers were the largest outdoor advertisers in the early 1990s, spending $123 million annually. At the same time, however, the category posted the greatest decline in spending--33.5 percent. TDI, for example, a large outdoor advertising agency, received 23.5 percent of its total revenue from tobacco companies in 1991 but less than 5 percent by 1994.
Because the outdoor ad industry relied so heavily on alcohol and tobacco advertising, it was hit hard by the continual drop in outdoor spending by alcohol and tobacco producers. These reductions can be credited to health considerations and legal restrictions such as those adopted by many states that forbade liquor, beer, and tobacco billboards from being placed within 500 feet of places where children spend a significant amount of time.
In an attempt to win new clients in the 1990s, outdoor advertising agencies began to use such technologically advanced equipment as computerized painting and mapping services. These tools allowed outdoor ad companies to provide high-quality images and to target specific geographic and demographic markets. Additionally, outdoor agencies promoted the cost effectiveness of their medium. Outdoor advertising, which in 1999 cost about 81 cents CPM (cost per thousand), was relatively inexpensive compared to other media. A 30-second television ad averaged $10.40 CPM on prime-time network and $18.90 CPM for a prime-time spot. A 60-second radio ad during drive-time cost $5.57 CPM. A quarter-page newspaper ad averaged $11.03 CPM, while a four-color magazine ad cost $9.14 CPM.
Marketers of apparel, packaged goods, financial services, entertainment, and other consumer products and services began to increase their usage of outdoor advertising in the early 1990s. For example, in 1992, McDonald's launched its first outdoor campaign with the introduction of its Value Meals program. Unlike McDonald's, however, most marketers did not use outdoor advertising for product launches but instead worked the medium in conjunction with television and radio. By 1995, such marketers as fashion designers Calvin Klein, Ralph Lauren, and Donna Karan had started using outdoor advertising as a major part of their ad campaigns, a move many in the industry took as a sign of the medium's growing strength. "The fashion industry has definitely brought respectability to the medium," Terry McGrath, a partner at the PGR Media ad agency, told Marketing News. "It's bringing in advertisers that wouldn't have even considered it before."
By the late 1990s, as outdoor advertising by alcohol and tobacco companies waned, other categories increased their spending in this medium. According to the OAAA, in 1998 the category of local services and amusements was the greatest spender, accounting for $190.9 million, or 10.6 percent, of all outdoor advertising revenues. Public transportation, hotel, and resorts, was a close second, with $176.8 million or 9.9 percent of total spending. Other smaller categories included retail, miscellaneous merchandise, restaurants, automotive dealers and services, insurance and real estate, and financial services.
By the mid-2000s, many advertisers viewed outdoor advertising as a viable alternative to other media. Formerly a stationary medium, new digital technologies began to expand the outdoor advertising business. These technologies included sophisticated LED, LCD, and digital-ink mediums that allowed networked signs to be changed almost instantly with a push of a button from a remote location. Leading outdoor advertiser Clear Channel was the first to utilize this technology, placing LED screens above 78 New York subway stations in early 2005. Clear Channel then launched its digital roadside billboards in Cleveland in April of that year. The company subsequently converted many of its static indoor signs to full-motion digital electronic signs. By the late 2000s other companies had jumped on the technology-enhanced bandwagon. For example, Captivate Network built a network of 8,200 TV screens in office building elevators with the aim of targeting business executives. In 2010 Clear Channel produced the "world's first 'real 3D' campaign," according toCampaign magazine, when it put ads for the movie Percy Jackson on 42-inch flat screens in bus shelters. The ads appeared to be 3D, without the viewers wearing special glasses.

Current Conditions

According to the OAAA, billboards accounted for about 66 percent of total outdoor advertising revenues in 2009. The other three outdoor mediums--street furniture, transit, and alternative media--made up the remaining 34 percent. Of the revenues from billboard advertising, 73 percent came from local ads, 18 percent from national ads, and 9 percent from public service ads. Growth was expected to continue into the 2010s, with increased use of digital boards and 3-D cinema screens as well as the placement of ads in alternative locations such as malls, sports bars, and gyms. According to Patrick Quinn of research firm PQ Media, there were about 450,000 billboards in the United States in 2009, of which approximately 1,600 were digital. Quinn predicated that figure would rise to 3,700 by 2014 and that, because digital boards can accommodate multiple advertisers, they would help increase the industry's revenues. Other figures from PQ Media showed that spending on digital billboards grew 15 percent in 2009 to reach $551 million, and research firm BIA/Kelsey predicted that total spending on all types of digital out-of-home (OOH) advertising would reach $3.7 billion by 2013.
Advertisers also continued to use digital billboards in new and innovative ways. For example, a Florida hospital posted the average waiting time in the emergency room on a digital billboard, and CC Radio of Chicago displayed real-time traffic information.
Advertisers that used traditional outdoor mediums were expected to benefit from the government's EYES ON research program, which was launched in 2010 and aimed to provide demographic, frequency, and reach information for billboards and other outdoor ads. More environmentally friendly materials were also being developed for nondigital billboards, such as recyclable polyethylene (PE)-based material, as opposed to the more traditional polyvinyl chloride (PVC).

Industry Leaders

Outdoor Systems, Inc., was the largest outdoor advertising firm in North America in 1999. The company had 112,500 bulletin, poster, mall, and transit advertising displays in the United States, Canada, and Mexico and about 125,000 subway advertising displays in New York City alone. The company operated in each of the 50 largest U.S. markets, 13 of the 15 largest Canadian markets, and 44 of the largest 45 Mexican markets. Founded in 1980, the company served the local Phoenix market until it went public in 1996. With that influx of capital, the company expanded rapidly, purchasing Gannett's outdoor advertising operations before acquiring Mediacom, Van Wagner Communications, and dozens of other competitors by the late 1990s. In May 1999, the company agreed to be acquired by Infinity Broadcasting Corporation in an $8.3 billion transaction.
Following that purchase, Infinity Broadcasting Corporation became the nation's leading outdoor advertising company. Outdoor Systems' 235,000 displays were folded into Infinity's outdoor advertising subsidiary, TDI Worldwide, which operated in the United States, the United Kingdom, Ireland, and the Netherlands. Infinity was founded as a small collection of radio stations in 1973 but aggressively began increasing its holdings during the 1980s. By the mid-1990s, it was the largest radio group in the United States. The controversial antics of such radio personalities as Howard Stern and Don Imus generated publicity for Infinity--and fines from the Federal Communication Commission. Westinghouse Electric (later renamed CBS) purchased Infinity in 1996, then spun it off two years later. By 2010, CBS Outdoor maintained about 550,000 outdoor media displays around the world, including 100,000 traditional billboards.
Clear Channel Outdoor Holdings Inc., a subsidiary of leading radio broadcaster Clear Channel Communications, was another leading outdoor advertiser with more than 830,000 properties in about 50 countries, including 195,000 displays in the United States. Clear Channel Outdoor posted 2009 sales of almost $2.7 billion and employed 6,311 people.
Lamar Advertising Co. was another large U.S. outdoor advertising company in terms of the number of displays. Operating in 45 states, the firm had erected approximately 150,000 billboards as well as 100,000 interstate logo signs. The company grew steadily after its formation as a bill-posting company in 1902. Beginning in the 1970s, Lamar fueled its diversification and geographic expansion through acquisitions. In 1998, the firm acquired about 40 companies. In September 1999, Lamar paid $1.9 billion for the outdoor advertising business of AMFM Inc.; as part of that deal, Lamar was required to divest itself of approximately $30 million worth of billboards. Lamar had sales of more than $1.0 billion and 3,000 employees in 2009.

Workforce

The workforce of outdoor advertising agencies is relatively small. According to the U.S. Bureau of the Census, 2,686 establishments operated in the display advertising industry in 2007, the latest year for which census figures are available. The number of employees that year totaled approximately 28,591.

Research and Technology

Technological developments, such as digital LED and LCD screens, computer painting, 3-D effects, and geographic and demographic mapping, have transformed outdoor advertising into a timely, targeted, and cost-effective medium. The creation of computerized painting eliminated the quality problems associated with traditional painting methods. Computerization allowed advertisers to see their ads beforehand on a computer screen, easily make changes, speed delivery time, and assure consistency in reproduction.
The introduction of computerized mapping and tracking systems was another important technological development for the out-of-home advertising industry. In late 1995, the OAAA established voluntary industry standards involving the use of bar coding and geocoding technologies. Global positioning systems (GPS) are used by many outdoor companies to track the precise location of billboards, as well as to incorporate other geographic and demographic data in order to devise customized marketing solutions. Standards for bar coding facilitate the tracking of advertising copy for all interested parties, including advertisers, printers, and outdoor companies.
Another innovation came with the invention of Poster Audience Research (Postar) in 1996. The system uses both demographic research and neural network technology to estimate the traffic passing billboards in a specified location and the relative visibility of the advertisement. Advertisers can use this information to manipulate other technology, such as rotating billboards that stay fixed during certain times of the day. For instance, advertisers seeking to reach businesspeople can have their signs appear during rush hour, while consumer goods appear during the middle of the day.
In July 1996, the Federal Highway Administration reversed its ban on off-premise changeable message signs. This technology enables a single structure to display up to three different messages or images. While still subject to state regulations, this federal decree gave outdoor campaigns a boost in competing for the advertising dollar, particularly since consumers had increasingly come to expect flashy and otherwise high-tech ad campaigns.
In the mid-2000s, the static medium of billboards and other signage was changed significantly with the introduction of digital technologies. Advertisers now had the ability to target their messages by time of day, location, and geography. Full-motion digital electronic signs allowed advertisers to change their messages nearly instantly and by remote location. This advancement made outdoor advertising more attractive to advertisers as consumers could be more narrowly and flexibly targeted.
© COPYRIGHT 2012 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. http://business.highbeam.com/industry-reports/business/outdoor-advertising-services

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